FCCC/CP/2022/10/Add.2

Decision 14/CP.27

Matters relating to the Standing Committee on Finance

The Conference of the Parties,

Recalling Articles 4 and 11 of the Convention,

Also recalling decisions 12/CP.2, 12/CP.3, 1/CP.16, paragraph 112, 2/CP.17,

paragraphs 120–121, 5/CP.18, 5/CP.19, 7/CP.19, 6/CP.20, 6/CP.21, 8/CP.22, 7/CP.23,

8/CP.23, 4/CP.24, 11/CP.25, 5/CP.26, 5/CMA.2 and 10/CMA.3,

Taking note of decision 14/CMA.4,

1. Welcomes the 2022 report of the Standing Committee on Finance;

2. Also welcomes the fifth Biennial Assessment and Overview of Climate Finance Flows

of the Standing Committee on Finance and the summary, and takes note of the

recommendations contained in the annex;

3. Notes that climate finance flows in 2019–2020 were 12 per cent higher than in

2017–2018, reaching an annual average of USD 803 billion, driven by investments in energy

efficiency of buildings, sustainable transport and adaptation; the 2019–2020 annual average

of public financial support reported by Parties included in Annex II to the Convention in their

biennial reports (USD 40.1 billion) represents an increase of 6 per cent from the annual

average reported for 2017–2018; the annual average of climate finance from multilateral

development banks to developing countries and emerging economies

(USD 45.9 billion)

represents a 17 per cent increase since 2017–2018; and UNFCCC funds and multilateral

climate funds committed USD 2.9 billion and USD 3.5 billion for climate finance projects in

2019 and 2020 respectively;

4. Notes with concern that global climate finance flows are small relative to the overall

needs of developing countries;

5. Also notes with concern that, despite the clear increasing trend in global climate

finance flows, they remain at a relatively low level in the broader context of other finance

flows, investment opportunities and costs;

6. Encourages Parties to the Convention to consider implementing the recommendations

referred to in paragraph 2 above, as appropriate;

7. Acknowledges the improvement in quality, transparency and granularity of

information in the fifth Biennial Assessment while recognizing that data limitations persist,

particularly in relation to private climate finance, including private finance mobilized by

developed country Parties through bilateral and multilateral channels, and finance in sectors

other than energy and transport, and requests further work in this regard in the sixth Biennial

Assessment, including in relation to data by region, private finance mobilized from public

interventions and financing arrangements relevant to averting, minimizing and addressing

loss and damage;

8. Stresses the importance of reporting on climate finance provided, mobilized, needed

and received at both the activity and country level, and of enhancing methodologies for

measuring and reporting on the results and impacts of climate finance;

9. Notes that the work of the Standing Committee on Finance on definitions of climate

finance

shows the variety of definitions in use;

FCCC/CP/2022/8–FCCC/PA/CMA/2022/7.

Also contained in document FCCC/CP/2022/8/Add.1–FCCC/PA/CMA/2022/7/Add.1.

See footnote 2 in Standing Committee on Finance. 2022. Fifth Biennial Assessment and Overview of

Climate Finance Flows. Bonn: UNFCCC. Available at https://unfccc.int/topics/climate-

finance/resources/biennial-assessment-and-overview-of-climate-finance-flows.

See document FCCC/CP/2022/8/Add.2–FCCC/PA/CMA/2022/7/Add.2.

FCCC/CP/2022/10/Add.2

10. Also notes the complexities associated with the diversity of definitions of climate

finance in use by Parties and non-Party stakeholders in relation to ensuring clear, aggregated

accounting and reporting of climate finance;

11. Requests the Standing Committee on Finance to prepare a report for consideration by

the Conference of the Parties at its twenty-eighth session (November–December 2023),

building on the Committee’s work on definitions of climate finance, on clustering types of

climate finance definitions in use that could be considered within the UNFCCC process,

including with a view to updating the Committee’s operational definition of climate finance,

as appropriate, and supporting Parties in their national reporting efforts and invites Parties

and external stakeholders to make further submissions thereon via the submission portal

30 April 2023;

12. Notes the report prepared by the Standing Committee on Finance on progress towards

achieving the goal of mobilizing jointly USD 100 billion per year to address the needs of

developing countries in the context of meaningful mitigation actions and transparency on

implementation;

13. Notes with concern that the draft guidance for the operating entities of the Financial

Mechanism prepared by the Standing Committee on Finance

was not utilized by the

Conference of the Parties and in this regard requests the Committee to improve its working

modalities for preparing the draft guidance for the operating entities of the Financial

Mechanism;

14. Expresses its sincere gratitude to the Government of Australia for its support in

ensuring the success of the second part of the Standing Committee on Finance Forum on

finance for nature-based solutions and notes with appreciation the high-level summary

thereof,

without prejudice to other multilateral processes, and welcomes the Forum’s specific

focus on indigenous peoples and knowledge;

15. Also welcomes financing just transitions as the topic for the Standing Committee on

Finance Forum in 2023;

16. Expresses its appreciation to the Governments of Australia and Germany and to the

European Commission for their financial contributions to support the work of the Standing

Committee on Finance;

17. Endorses the workplan of the Standing Committee on Finance for 2023

and

underlines the importance of the Committee focusing its work in 2023 on its current mandates;

18. Welcomes the efforts of the Standing Committee on Finance to continue to strengthen

its engagement with stakeholders in the context of its workplan, including UNFCCC

constituted bodies, private entities and other entities outside the UNFCCC, and encourages

the Committee to continue such efforts in 2023;

19. Also encourages the Standing Committee on Finance to continue to enhance its efforts

to ensure gender responsiveness in implementing its workplan and requests Parties to

consider gender balance and geographical representation when nominating members to the

Committee;

20. Encourages the Standing Committee on Finance to take further steps to accurately,

adequately and equitably reflect the views of Parties in its future reports and ensure that those

views are presented in a balanced manner that reflects their diversity;

21. Requests the Standing Committee on Finance to report to the Conference of the Parties

at its twenty-eighth session on its progress in implementing its workplan for 2023;

22. Also requests the Standing Committee on Finance to consider the guidance provided

to it in other relevant decisions of the Conference of the Parties.

https://www4.unfccc.int/sites/submissionsstaging/Pages/Home.aspx.

FCCC/CP/2022/INF.2.

FCCC/CP/2022/8/Add.5–FCCC/PA/CMA/2022/7/Add.5.

FCCC/CP/2022/8/Add.6–FCCC/PA/CMA/2022/7/Add.6.

FCCC/CP/2022/8–FCCC/PA/CMA/2022/7, annex II.

FCCC/CP/2022/10/Add.2

Annex*

Summary and recommendations of the fifth Biennial

Assessment and Overview of Climate Finance Flows

[English only]

I. Context and mandates

1. The fifth BA conducted by the SCF

provides an updated overview of climate finance

flows up until 2020, highlighting the trends therein, and an assessment of the implications of

these flows for international efforts to address climate change. The fifth BA includes:

(a) Information on recent developments in methodologies related to the tracking

of climate finance at the international and domestic level, the operational definitions of

climate finance in use and the indicators for measuring the impacts of climate finance, as

well as emerging methodologies that support tracking the consistency of finance flows (see

also the box below);

(b) An overview of climate finance flows from developed to developing countries,

and available information on domestic climate finance, cooperation among developing

countries

and other climate-related finance flows that constitute global climate finance;

composition and purpose; an exploration of the effectiveness, accessibility and magnitude (in

the context of broader flows) of climate finance flows; and insights into country ownership

and alignment of climate finance flows with the needs and priorities of beneficiaries.

2. Since the first BA was conducted in 2014, the preparation of BAs has been guided by

mandates from the COP and the CMA to the SCF.

The fifth BA comprises this summary,

prepared by the SCF, and a technical report prepared by experts under the guidance of the

SCF drawing on information and data from a range of sources. The report was subject to

extensive stakeholder input and expert review, but remains a product of the external experts.

Challenges and limitations in collecting and aggregating data on climate finance

The challenges and limitations outlined below need to be taken into consideration when

deriving conclusions and policy implications from the fifth BA:

(a) The fifth BA covers 2019–2020, a period during which the coronavirus disease 2019

pandemic may have affected the provision, mobilization and reporting of climate

finance flows;

(b) In compiling the estimates of climate finance flows, efforts were made to ensure

they are based on activities that are in line with the operational definition of climate

finance adopted in the first BA in 2014 and to avoid double counting. Challenges were

* For the list of abbreviations and acronyms, see document

FCCC/CP/2022/8/Add.1−FCCC/PA/CMA/2022/7/Add.1.

The SCF assists the COP in exercising its functions with respect to the Financial Mechanism,

including in terms of measurement, reporting and verification of support provided to developing

country Parties through activities such as the BA. The SCF also serves the Paris Agreement, in line

with its functions and responsibilities established under the COP (as per decision 1/CP.21, para. 63),

including through the BA.

For the purpose of the overview of climate finance in the BA, various data sources are used to

illustrate flows from developed to developing countries, without prejudice to the meaning of those

terms in the context of the Convention and the Paris Agreement, including but not limited to flows

from Annex I Parties and Annex II Parties to non-Annex I Parties and MDBs; flows from OECD

members to non-members; flows from OECD Development Assistance Committee members to

countries eligible for OECD Development Assistance Committee official development assistance; and

other relevant classifications.

Decisions 2/CP.17, para. 121(f), 1/CP.18, para. 71, 5/CP.18, para. 11, 3/CP.19, para. 11, 4/CP.24,

paras. 4, 5 and 10, and 11/CP.25, paras. 9–10; and decision 5/CMA.2, paras. 9–10.

FCCC/CP/2022/10/Add.2

encountered in aggregating and analysing information from diverse sources with

varying degrees of transparency;

of Annex I Parties (including Annex II Parties), which were to include information on

climate finance provided to non-Annex I Parties in 2019–2020, to no later than 31

December 2022.

Therefore, during preparation of the fifth BA, the SCF invited

Annex II Parties to provide preliminary data on climate finance provided and mobilized

for 2019 and 2020. These preliminary data may be subject to change once fifth biennial

reports are submitted by Parties by the end of 2022;

(d) In the area of global climate finance, challenges remain in filling data gaps,

particularly on private finance for adaptation activities and for mitigation activities in

the AFOLU, the waste and the water and sanitation sectors. Methodologies for

calculating climate finance based on total cost or incremental cost produce different

estimates by activity. This potentially leads to limitations regarding the completeness

of data and any interpretation of the relative shares of global climate finance going to

different themes or sectors. Energy efficiency estimates do not include data broken

down by public or private actor financial instrument, or at country level. Some data

sources, such as those for renewable energy, provide activity-level data but may make

country- and technology-level assumptions on finance flows to fill data gaps. In

compiling data from various sources to aggregate global climate finance flows,

approaches that ensure the avoidance of potential overlaps in coverage are taken;

(e) Regarding domestic climate finance, although more countries are developing

climate finance reporting systems, time lags in implementation mean data are

underreported for 2019–2020. Amounts in relation to public expenditure may refer to

ex ante budget allocations or ex post actual expenditures. Furthermore, the climate

relevance of activities reported may refer to weighted criteria per activity or to positive

activity lists;

(f) Data on international climate finance flows are compiled using various

methodologies and have varying interpretations. Flows from developed to developing

countries – covering finance provided, mobilized and received – include a mix of data

based on disbursements to projects and recipients in the given year or on financial

commitments made in the reporting year to activities that may be implemented over

several years. Information on South–South cooperation in climate finance flows

remains relatively underreported. The classification of data such as by geographical

region or by granularity is not uniform across data sources. As for previous BAs, for

the fifth BA, no aggregation of data from different sources for finance flows from

developed countries to developing countries was carried out owing to these

challenges and limitations.

The SCF will continue to contribute, through its activities, to the progressive

improvement of the measurement, reporting and verification of climate finance in future

BAs, to help address these challenges and limitations.

II. Key findings

A. Methodological issues related to transparency of climate finance

3. New reporting tables will improve the information on climate finance submitted

by Parties. CMA 3 adopted new tables for reporting by Parties under the Paris Agreement

on climate finance provided to and mobilized for developing countries and climate finance

needed and received by developing countries. The new tables will be used for reporting from

the end of 2024 in biennial transparency reports. A number of improvements will facilitate

enhancing the granularity of data reported on climate finance (including sectoral and

subsectoral data) and on whether the financial support also contributes to capacity-building

or technology transfer, and will provide an option to report on grant-equivalent amounts of

Decision 6/CP.25, para. 3.

FCCC/CP/2022/10/Add.2

climate finance provided and mobilized. In addition, CMA 3 requested the secretariat to

establish an interactive web portal to facilitate the availability of information on climate

finance reported by Parties.

4. The coverage and granularity of reporting on climate finance received by

non-Annex I Parties is improving. The proportion of BURs that include information on

finance received rose from approximately 60 per cent in 2014 to over 97 per cent in 2021. A

total of 70 Parties have provided quantitative information on climate finance received at the

project or activity level in tabular format. More Parties are reporting details on financial

instruments and implementing entities and on whether finance received is for mitigation or

adaptation. Information that is reported the least includes that related to the use, impacts and

results of climate finance. Limited capacities and resources to track climate finance received

can pose challenges for non-Annex I Parties in reporting this information, and a lack of

reporting on the year an activity received climate finance can make it difficult to compile and

aggregate data.

5. Systems to track domestic public climate finance are growing in both developed

and developing countries. Twenty-four jurisdictions have established tracking systems for

national budgets, with a further 24 countries having methodologies for tracking climate-

relevant budgets in development. Building on previous work carried out as part of the climate

public expenditure and institutional reviews of the United Nations Development Programme,

many countries are developing guidance on green budgeting frameworks that include

climate-relevant activities. Domestic public expenditures on climate change in 2019–2020

amounted to an estimated total of USD 134.2 billion (see chap. II.B below).

6. Renewable energy, CCU/S, electrified transport, energy efficiency of buildings,

and water management and supply are the most common mitigation activities listed

across international, regional and national taxonomies or classifications. An analysis of

12 classification lists or taxonomies related to climate change mitigation activities, including

those of MDBs and of regional and national jurisdictions, revealed that mitigation activities

that appear most commonly (in more than 75 per cent of lists) are renewable energy,

electrified transport, energy efficiency of buildings, water management and supply, and

abatement technologies (e.g. carbon dioxide capture and use or storage). Different eligibility

criteria are in use for common activities relating to agriculture, waste, transport infrastructure

and power generation (the latter including geothermal power, hydropower, bioenergy and

efficiency improvements). Less common activities (in 25–75 per cent of lists) include gas-

fired power generation, waste-to-energy processes, sustainable logging, and information and

communication technology infrastructure. Of the uncommon activities (less than 25 per cent

of lists), notable are nuclear power generation, aviation and mining. Of the 12 taxonomies of

countries and institutions reviewed, 10 make use of exclusion lists across mitigation sectors.

For adaptation, most taxonomies refer to process-based screening methods rather than an

activity list owing to adaptation activities being specific to a given local environment or

context. The evaluation baseline for adaptation screening processes is typically based on

environmental and climate risk and vulnerability assessments or national, regional or global

resilience and biodiversity standards and codes. In addition, 7 of the 12 analysed taxonomies

apply the ‘do no significant harm’ principle (to other environmental objectives) when

assessing the eligibility of activities.

7. Climate finance providers are advancing more indicators and metrics to measure

what climate finance is achieving on the ground. Multilateral climate funds (including the

operating entities of the Financial Mechanism), multilateral institutions and national

development finance institutions are in the process of developing or have already developed

frameworks for measuring outputs, outcomes and impacts of climate finance interventions,

with the granularity of indicators and metrics increasing. Multilateral climate funds, in their

results management frameworks, capture information on 141 indicators, 48 of which are core

indicators, and most multilateral institutions, as well as bilateral contributors, use a similar

set of mitigation and adaptation indicators. Common indicators identified for mitigation are

greenhouse gas emissions reduced (in t CO

eq) and sector-specific metrics for the energy,

transport and land-use sectors. For adaptation, common indicators in use are the number of

Decision 5/CMA.3.

FCCC/CP/2022/10/Add.2

beneficiaries; the hectares of land protected; and the number of policies, projects, plans,

systems or assets that foster climate resilience. An ongoing challenge is defining and

reporting on outcome and impact indicators that enable the long-term or indirect effects of

climate finance interventions (e.g. job creation or the increased climate resilience of

beneficiaries) to be captured as opposed to measuring direct project outputs (e.g. number of

beneficiaries or number of early warning systems installed). Methodologies for outcome

measurement are at earlier stages of development by climate finance providers than those for

output measurement.

8. Increasing efforts are being made to enhance the transparency and

comparability of approaches for tracking consistency with low-emission and climate-

resilient development pathways. Methodological developments in this area, particularly

from the private financial sector and supervisory authorities, are in a dynamic growth phase.

The aim of these initiatives and efforts is to offer discussion of and guidance on appropriate

choices of emission pathways and scenarios, emission metrics and measures, geographical

and sector coverage, the role of carbon offsets, the formulation and implementation of

transition plans and governance frameworks, and aggregate Paris Agreement alignment

indicators. In the financial sector, a focus of current approaches on decarbonization and net

zero targets, rather than on fostering climate change adaptation and resilience, continues to

be observed. Since the fourth BA, initiatives that seek to increase the transparency and

understanding of approaches for tracking consistency have emerged – notable among these

are the United Nations High-Level Expert Group on the Net-Zero Emissions Commitments

of Non-State Entities and the Expert Peer Review Group under the Race to Zero campaign.

In addition, various private and public sector reports that assess approaches to alignment with

the Paris Agreement continue to be published (see SCF documents on work under this area

for further information).

B. Overview of climate finance flows in 2019–2020

9. Global climate finance flows were 12 per cent higher in 2019–2020 than in

2017–2018, reaching an annual average of USD 803 billion, with the trend being driven

by an increasing number of mitigation actions in buildings and infrastructure and in

sustainable transport, as well as by growth in adaptation finance. The growth in finance

flows in 2019–2020 was largely driven by increased investment in the energy efficiency of

buildings (USD 34 billion increase), sustainable transport (USD 28 billion increase) and

adaptation finance (USD 20 billion increase). While overall investment in clean energy

systems remained stable, public energy investment increased its share of total finance flows.

Adaptation finance increased by 65 per cent, from an annual average of USD 30 billion in

2017–2018 to USD 49 billion in 2019–2020, driven mainly by financing from bilateral and

multilateral development finance institutions. Figure 1 provides a breakdown, by sector, of

global climate finance flows in 2017–2020 and figure 2 provides an overview of global

climate finance and finance flows from developed to developing countries in 2019–2020.

FCCC/CP/2022/8/Add.3−FCCC/PA/CMA/2022/7/Add.3 and

FCCC/CP/2022/8/Add.4−FCCC/PA/CMA/2022/7/Add.4.

FCCC/CP/2022/10/Add.2

Figure 1

Global climate finance flows in 2017–2020 by sector

(Billions of United States dollars)

10. The continued decline in renewable energy technology costs in 2019–2020 compared

with those in 2017–2018 meant that renewable energy investments, despite the economic

slowdown caused by the coronavirus disease 2019 pandemic, remained close to the record

high in 2017. Technology cost decreases in 2019–2020 compared with 2018 for onshore wind

(13 per cent), offshore wind (9 per cent) and solar photovoltaic (7 per cent) emphasized how

greater impacts are now achieved for each new dollar invested. Aggregate investments in

new renewable energy generation projects made up the largest segment of global climate

finance. The declining costs of renewable energy alongside the maintenance of high levels

of investment indicates that the overall deployment of renewable energy technologies has

increased in real terms.

11. Government pandemic recovery packages included up to USD 513 billion of

spending allocated to green or climate-related measures (21 per cent of the total

USD 2.5 trillion) up until the end of 2020. Approximately 76 per cent (USD 392 billion) of

climate-related recovery spending was announced by developed countries and the remainder

by developing countries, particularly those in Asia. Data from climate budget tagging

systems and other sources indicated domestic public climate finance amounted to USD 134

billion per year in 2019–2020, half of which was in 21 developing countries and the other

half in 6 developed countries or jurisdictions.

Figure 2

Climate finance flows in 2019–2020

(Billions of United States dollars, annualized)

FCCC/CP/2022/10/Add.2

Notes: (1) Figure note (a): other mitigation investments include industry, waste and wastewater, information and communications

technology and other cross-sectoral investments; (2) Figure note (b): includes investments from amounts listed by sector above that are

discounted when calculating the global aggregate to avoid double counting; (3) Figure note (c): flows are from developed to developing

countries, see section 2.5.2 of the technical report of the fifth BA for further information; (4) Figure note (c): estimates include private

finance mobilized through public interventions by developed countries; (5) Figure note (d): this includes private finance in addition to

finance mobilized through bilateral and multilateral channels and institutions.

12. Public climate finance flows from developed to developing countries increased

by between 6 and 17 per cent, depending on the source, in 2019–2020 compared with

2017–2018. Preliminary data from Annex II Parties on climate-specific finance provided for

2019–2020 showed that it increased by 6 per cent from 2017–2018 to USD 40.1 billion per

year on average. Most of the climate-specific finance (79 per cent) was channelled through

FCCC/CP/2022/10/Add.2

bilateral, regional and other channels, with the remainder consisting of contributions or

inflows to multilateral climate funds and multilateral financial institutions.

13. Mitigation finance constituted the largest share of climate-specific financial support

through bilateral, regional and other channels, at 57 per cent (USD 17.9 billion). However,

the share of adaptation finance continued to increase – from 20 per cent (USD 6.4 billion) in

2017–2018 to 28 per cent (USD 8.9 billion) in 2019–2020 – as it grew at a higher rate than

mitigation finance. In 2019–2020, adaptation finance through bilateral, regional and other

channels grew 40 per cent while mitigation finance decreased by 13 per cent. The share of

cross-cutting finance, which serves both mitigation and adaptation purposes, stagnated at 14–

15 per cent (USD 4.4 billion and USD 4.7 billion) in 2017–2018 and 2019–2020,

respectively.

14. UNFCCC funds and multilateral climate funds approved a combined USD 2.9 billion

and USD 3.5 billion for climate change projects in 2019 and 2020 respectively. The annual

average for 2019–2020 (USD 3.2 billion) represents an increase of 21 per cent compared

with the annual average for 2017–2018, attributable primarily to increases in project

approvals by the GEF Council, the GCF Board and the Clean Technology Fund. In terms of

inflows, the GEF raised USD 5.3 billion from 29 contributors under the GEF-8 replenishment

in 2022 for the programming period 2022–2026, an increase of more than 30 per cent

compared with the amount raised under GEF-7. Under GEF-8, USD 852 million was

allocated to the climate change focal area for mitigation, an increase of 6 per cent compared

with the amount allocated under GEF-7. The Adaptation Fund registered USD 356 million

in new pledges from 16 donors at COP 26, which is more than triple the amount it raised in

2020 (USD 116 million).

15. MDBs provided USD 46 billion and USD 45 billion in climate finance to developing

and emerging economies in 2019 and 2020 respectively. The annual average of USD 45.9

billion in 2019–2020 represents a 17 per cent increase compared with the 2017–2018 amount.

The attribution of these flows from developed to developing countries is calculated at

USD 29.3–30.5 billion in 2019 and USD 28.2–33.2 billion in 2020.

16. Data on private climate finance flows to developing countries remain challenging to

compile and assess. There is a methodological difference between measuring private finance

for climate action in general and measuring climate finance mobilized through public

interventions. With existing methodologies and approaches, tracking private finance

mobilized by technical assistance or policy interventions is difficult. Further, data sources

often do not specify whether private funds are sourced from private sector entities in

developed or developing countries and whether these funds are received by public or private

sector entities from developed or developing countries. OECD estimates that private climate

finance mobilized by developed countries through bilateral and multilateral channels

amounted to USD 14.4 billion and USD 13.1 billion in 2019 and 2020 respectively. The

annual average of USD 13.8 billion represents a 6 per cent decrease compared with the annual

average of USD 14.6 billion in 2017–2018.

17. The increase in submissions of BURs from non-Annex I Parties resulted in a greater

amount of information on finance being available for the fifth BA than for previous BAs.

However, time lags in data availability for reporting made it difficult to compile updated,

complete information on finance received in 2019–2020. Of the 79 Parties that had submitted

BURs as at 30 June 2022, 28 included some information on climate finance received in 2019

or 2020 in their reports. In total, USD 10.0 billion was reported as received for projects

starting in 2019 and USD 1.6 billion for projects starting in 2020. Approximately 81 per cent

of the 2019 amount was specified as coming from bilateral institutions in developed countries

or multilateral institutions and 15 per cent from institutions based in developing countries;

the origin of the finance was unspecified for the remaining amount.

18. Trends in South–South climate finance flows varied depending on the source of

finance. Finance commitments from International Development Finance Club members

based in non-OECD countries to projects in other non-OECD countries amounted to USD 1.7

billion and USD 2.2 billion in 2019 and 2020 respectively, which represented a substantial

decrease from the USD 4.1 billion committed in 2018. The Asian Infrastructure Investment

Bank and the New Development Bank continued to increase finance flows, and

FCCC/CP/2022/10/Add.2

MDB-attributed financing from non-Annex II Parties increased from around USD 9.1 billion

in 2017–2018 to an annual average of USD 11.0 billion in 2019–2020. Investments in

renewable energy and sustainable transport projects decreased from an annual average of

USD 3.2 billion in 2017–2018 to USD 2.6 billion in 2019–2020. Overall, the availability of

data on and the coverage of climate finance flows between developing countries remain

limited.

C. Assessment of climate finance flows

19. The collective goal of jointly mobilizing USD 100 billion per year by 2020 to

address the needs of developing countries in the context of meaningful mitigation action

and transparency on implementation was not fully met in 2020.

20. More public finance flows from developed to developing countries are for

mitigation than for adaptation, yet adaptation finance has grown significantly through

bilateral channels and MDBs. In 2019–2020, on average, mitigation had a 57 per cent share

(USD 17.9 billion) of bilateral climate finance, a 37 per cent share (USD 1.2 billion) of

multilateral climate fund climate finance and a 62 per cent share (USD 23.6 billion) of MDB

climate finance, while adaptation had corresponding shares of 28, 19 and 36 per cent

(USD 9.0 billion, USD 605 million and USD 13.8 billion respectively). Since 2017–2018,

adaptation finance from bilateral channels has grown by 39 per cent (USD 2.5 billion) and

from MDBs by 48 per cent (USD 6 billion), while adaptation finance from multilateral

climate funds has remained constant. The share of public climate finance flows contributing

to both adaptation and mitigation from multilateral climate funds rose to 35 per cent (USD 1.1

billion) in 2019–2020 from 27 per cent (USD 785 million) in 2017–2018. When assessing

the balance of finance between mitigation and adaptation, it is worth considering different

approaches to measuring climate finance flows and considering whether data are adjusted by

the financial instrument providing the resources. Information on face-value financial volume

can be complemented with information on grant-based equivalent financial volume (as is

done by the GCF to assess its mitigation and adaptation split). The number of interventions

and information on how different institutions allocate finance can also help inform

discussions on balance.

21. Public adaptation finance is predominantly delivered through grants while

public mitigation finance predominantly takes the form of loans. In 2019–2020, grants

accounted for 57 and 99 per cent (USD 8.5 billion and USD 1.2 billion) of the face value of

bilateral adaptation finance and of adaptation finance from multilateral climate funds

respectively, compared with 64 and 95 per cent (USD 5.9 billion and USD 1.1 billion)

respectively in 2017–2018. In 2019–2020, 15 per cent of adaptation finance flowing through

the MDBs was grant-based (USD 2.1 billion) (see figure 3). Mitigation finance remains less

grant-based in nature, with 31 per cent of bilateral flows (USD 4.6 billion), 30 per cent of

multilateral climate fund approvals (USD 865 million) and less than 5 per cent of MDB

investments (USD 1.1 billion) taking the form of grants.

For more information see document FCCC/CP/2022/8−FCCC/PA/CMA/2022/7.

FCCC/CP/2022/10/Add.2

Figure 3

Public climate finance flows from developed to developing countries in 2019–2020, by

theme, source and financial instrument

Source: Analysis of OECD Development Assistance Committee Creditor Reporting System

statistics and Climate Funds Update.

22. Reflecting their geographical and population sizes, Asia and Africa are the

regions receiving the largest total amounts of public climate finance. Asia received the

most climate finance for adaptation and mitigation projects and programmes from bilateral

channels, multilateral climate funds and MDBs, with an average of 36 per cent of the total

climate finance provided. Asia was followed by Africa (average of 27 per cent) and Latin

America and the Caribbean (average of 16 per cent). The remainder was shared among

developing countries of Eastern and Southern Europe and Oceania.

On a per capita basis,

the less populous developing country regions Oceania and Eastern and Southern Europe

received the largest amounts of climate finance (USD 5.1–49.5 and USD 1.0–84.2

respectively), followed by Latin America and the Caribbean (USD 0.8–10.7), Africa

(USD 0.6–8.4) and Asia (USD 0.2–4.0). These data do not, however, consider differing costs

for climate change solutions in different regions, adjust for purchasing power or address the

relative scale of climate vulnerabilities or emission reduction potential.

23. Support provided to the LDCs and SIDS as a proportion of overall public climate

finance flows remained relatively stable compared with previous years. In 2019–2020,

funding provided to the LDCs accounted for 25 per cent of bilateral flows, 26 per cent of

approvals from multilateral climate funds and 20 per cent of MDB climate finance. While

bilateral channels and MDBs increased their adaptation finance commitments to the LDCs

from 2017–2018 to 2019–2020, multilateral climate funds decreased their adaptation finance

while doubling their mitigation finance from 2017–2018 to 2019–2020.

24. In 2019–2020, funding provided to the SIDS accounted for 3 per cent of bilateral

flows, 7 per cent of approvals from multilateral climate funds and 2 per cent of MDB climate

The fifth BA, for the first time, presented a geographical breakdown of public bilateral sources,

multilateral climate funds and MDBs with a unified regional classification in accordance with the

standard country or area codes for statistical use (M49) of the United Nations Statistics Division.

Only non-Annex I Parties were included in the country grouping analysis.

FCCC/CP/2022/10/Add.2

finance. International public climate finance flows to SIDS are predominantly adaptation

focused. Grant finance plays a strong role in SIDS, ranging from 43 to 89 per cent across the

channels analysed. The LDCs and SIDS have specific vulnerabilities and needs, which are

partially reflected in the climate finance provided to them on a per capita basis. Per capita

climate finance reached USD 3.6–16.9 for SIDS and USD 0.8–9.4 for the LDCs in

2019–2020 (see figure 4).

Figure 4

Geographical distribution of climate finance by volume and on a per capita basis in

2019–2020

25. Between 2016 and 2020, private climate finance mobilized by developed

countries for developing countries through bilateral and multilateral channels totalled

USD 66.8 billion. Of this amount, 86 per cent was mobilized for mitigation actions,

particularly in the energy sector (53 per cent of total mobilized finance in the five-year

period). Private finance mobilized for adaptation actions targeted industry, mining and

construction. Private climate finance was mobilized through number of mechanisms,

dominated by direct investment in companies and special purpose vehicles, which together

accounted for 44 per cent of the total. MDBs mobilized 57 per cent of total estimated private

climate finance, followed by bilateral providers and multilateral climate funds. SIDS and the

LDCs received 1 and 8 per cent respectively of total private finance mobilized.

26. Accreditation to multilateral climate funds increased by 36 per cent in

2019–2020, driven by a rising number of national and regional institutions being

accredited; however, while national and regional accredited entities now account for

FCCC/CP/2022/10/Add.2

more than half of all accredited entities, they accounted for only 10 per cent of financial

outflows in 2019–2020. Climate finance readiness and project preparation initiatives play a

key role in facilitating access to climate finance. The number of partners through which

developing countries can access multilateral climate funds continues to grow rapidly, driven

by GCF accreditation. Efforts are under way to enhance access beyond national and regional

entities, by supporting access at the local level.

27. Interest in country platforms that facilitate country ownership of climate finance

flows and their alignment with national priorities is emerging. Country ownership is a

fundamental factor in the delivery of effective finance but is also a broad concept

encompassing active stakeholder engagement, links between climate policies and economic

growth and development policies, and national spending and tracking systems for climate

finance. Recent studies drawing on experience from development cooperation suggest that to

be successful in stimulating climate action, country platforms need to secure and maintain

political will, coordinate public finance from multiple channels and harness private

investment. Also important is that country platforms are tailored to country needs and

priorities.

28. Reported expected and actual results from climate finance providers indicate an

increase in portfolio-level emission reductions and number of beneficiaries reached.

Multilateral climate funds reported a combined 96.3 Mt CO

eq emission reductions achieved

and 54.8 million beneficiaries reached through their interventions. Expected results from the

portfolios of approved or currently implemented projects are orders of magnitude higher, for

example, 1,980 Mt CO

eq emission reductions and 588 million direct and indirect

beneficiaries in the GCF portfolio alone. While multilateral climate funds are increasing their

transparency and reporting under their results frameworks more regularly, they face

persistent challenges in impact measurement, namely, that direct project output indicators are

easier to define that outcome indicators and that reporting on actual results is largely

dependent on the reporting capacity of implementing entities. MDBs present mitigation and

adaptation outcomes to varying degrees against their results and impact frameworks, often

for their entire portfolios rather than on climate-specific support, while bilateral contributors

have differing approaches to impact reporting. In general, it takes at least several years before

being able to report on outcomes and impacts of approved and implemented projects

supported by climate finance, and this time lag poses challenges for comprehensive portfolio

impact reporting.

29. The way in which gender issues are addressed under the governance and

operational frameworks of the operating entities of the Financial Mechanism and

multilateral climate funds has improved. However, the development of systems for

monitoring and reporting on gender-related outcomes at the project and portfolio level is still

in progress, as is the building of capacity of the operating entities to implement gender-

responsive policies. This suggests work remains to be done on strengthening gender

mainstreaming efforts and the availability of gender-disaggregated and other gender-related

data to evaluate outcomes.

30. Global climate finance flows are small relative to the overall needs of developing

countries. Global climate finance in 2019–2020 was estimated to be USD 803 billion. This

amount is 31–32 per cent of the annual investment needed for the global temperature rise to

follow a well below 2 °C or a 1.5 °C pathway. This level of climate finance is also below

what one would expect in the light of the investment opportunities identified and the cost of

failure to meet climate stabilization targets.

31. More can be done to ensure that finance flows are consistent with climate change

objectives. Such efforts include the reform of fiscal policies, financial policies and

regulations and the integration and management of climate risk for financial decision-making

processes by private actors and the financial sector, with care taken in all circumstances to

manage a just and equitable transition for all.

32. Given the scale and speed of effort needed to align finance flows with low-emission,

climate-resilient development pathways, it is critical to consider climate finance flows within

the context of broader finance flows (see figure 5). A sole focus on positive climate finance

flows will be insufficient to meet the overarching purpose and goals of the Paris Agreement.

FCCC/CP/2022/10/Add.2

This does not mean that broader finance flows must all have explicit beneficial climate

outcomes, but it does mean that they must integrate climate risks into decision-making and

avoid increasing the likelihood of negative climate outcomes.

Figure 5

Global climate finance in the context of broader finance flows, opportunities and costs

Notes: (1) Data points are provided to place climate finance in context and do not represent an

aggregate or systematic view; (2) All flows are global and annual averages for 2019–2020 unless

otherwise stated; (3) The representation of stocks that overlap is not necessarily reflective of real-world

overlaps. The flows are not representative of all flows contributing to the stocks; (4) Climate finance

flows are those represented in section B of the summary and recommendations and chapter 2 of the

fifth BA technical report; (5) For data sources, see chapter 3 of the fifth BA technical report.

33. Across the key areas of climate finance identified through the recommendations

arising from previous BAs, the findings of the fifth BA reveal both progress and continuing

challenges, as presented in the table below.

FCCC/CP/2022/10/Add.2

Following up on recommendations from previous BAs: progress and challenges

Area of recommendation

Progress

Challenges

Improve transparency of reporting

of climate finance provided and

received

(a), (b), (c), (d)

Improved reporting tables agreed for

implementation in 2024

Increasing number of developing

countries reporting on climate finance

received

Limited capacities and resources to

track climate finance received and

report on the impacts and outcomes of

climate finance

Improve data coverage, granularity

and tracking of flows from all

sources, including developing

country Parties, international

financial institutions and private

finance data providers

(e), (f), (g), (h)

Increasing data coverage for financing

of electric vehicles, climate finance

mobilized and domestic climate finance

reporting

Scarcity of data on energy efficiency,

the AFOLU sector, buildings,

industrial sectors and adaptation, in

particular from the private sector, as

well as on South–South cooperation

Align climate finance with national

needs, plans, climate change

frameworks and priorities,

enhancing country ownership

(j), (l), (p)

Significantly increased number of

direct access entities and national

implementing entities and other

accredited entities of multilateral

climate funds

Growing number of national

investment plans and strategies to

target climate finance

Publication of needs determination

report

Finance flows channelled through

regional and national entities remain

low

Lack of support for local-level access

beyond national or regional entities

Methodological, capacity and data

limitations in development of project

pipelines

Balance funding for mitigation and

adaptation

(l)

Increase in adaptation finance of 39

and 48 per cent through bilateral

channels and MDBs respectively

since 2017–2018

Achievement by GCF of a 50:50 balance

in mitigation and adaptation

on a grant-equivalent basis

Most adaptation finance from bilateral

channels and multilateral climate funds

now in the form of grant finance

Difficulties in costing adaptation

needs to inform assessments of

balance

Different accounting approaches

applied for mitigation and adaptation

finance to inform assessment of

balance

Encourage the uptake of available

resources to strengthen

institutional capacities for

programming climate action and

tracking climate finance

(k), (l)

21 dedicated access, readiness and

project preparation support modalities

offered by multilateral climate funds

48 identified national climate funds in

countries that are not OECD members

48 jurisdictions with domestic climate

finance tracking systems, and 35

taxonomies formulated by 30

jurisdictions and 5 international or

national organizations

Different funding requirements of

diverse climate finance actors

Time lag in reporting from nascent

domestic climate finance tracking

Improve tracking and reporting of

the impacts of climate finance,

including the incorporation of

‘climate proofing’ and climate

resilience measures in line with

new scientific information

(n), (o)

Increased granularity of impact

measurement frameworks (three

multilateral climate funds have adopted

revised frameworks since 2018)

Wide availability of expected results

reporting

Initial development of transformational

change indicators

Limited ex post results data in

reporting chains

Limited availability of climate finance

specific portfolio-level impact

reporting from MDBs and bilateral

sources

Trade-offs between results

measurement comparability and

context-specific impact measurement

(including at the country, local and

sectoral level)

FCCC/CP/2022/10/Add.2

Area of recommendation

Progress

Challenges

Limited approaches for measuring

transformational change

Improve tracking and reporting of

gender-related aspects of climate

finance

(m)

Gender mainstreaming in governance

and operational frameworks of climate

finance contributors (all multilateral

climate funds with revised frameworks

or policies since 2018)

Limited implementing capacities and

availability of gender-disaggregated

data on outcomes and impacts

Update data sets and information

relevant to Article 2, paragraph

1(c), of the Paris Agreement

(i), (q)

Global proliferation of private and

public sector actor approaches for

aligning finance flows

Lack of data on implementation of

Paris alignment approaches and on

common standards in approaches to

prevent greenwashing – this

complicates evaluation of approaches

Letters in parentheses denote the relevant recommendation from para. 51 of the summary and recommendations of the third (2018)

BA (available at https://unfccc.int/BA-2018). No recommendations were included in the fourth (2020) BA.

III. Recommendations

34. The SCF invites the COP and the CMA to consider the recommendations presented

in chapter III.A–C below. The three sets of recommendations relate to chapter II.A–C above.

A. Methodological issues related to climate finance flows

35. Recommendations on methodological issues related to climate finance flows are as follows:

(a) Encourage Parties to report on climate finance provided, mobilized, needed

and received in the new common tabular format for their first biennial transparency report to

the highest level of granularity possible, taking into account the flexibility for those countries

that need it in the light of their capacities, in accordance with the modalities, procedures and

guidelines of the enhanced transparency framework under the Paris Agreement, in particular

to report annual activity-level data;

(b) Encourage Parties to adopt or follow green- and climate-budgeting approaches

and improve or establish climate finance tracking systems at the domestic level to inform

their implementation of nationally determined contributions and adaptation communications;

provided, mobilized, needed and received at both the activity- and the country-level;

(d) Encourage climate finance and data providers to further improve the data and

the methodologies necessary for tracking private finance mobilized by developed countries,

and others in a position to do so, through technical assistance, policy support and other public

interventions for climate action in developing countries;

(e) Encourage Parties and climate finance providers to enhance their

methodologies for measuring and reporting on climate finance results and impacts;

(f) Encourage Parties and climate finance providers to enhance their reporting on

the qualitative aspects of climate finance, including policies, approaches and other factors

related to strong enabling environments and delivering results;

(g) Encourage Parties, through the enhanced transparency framework and taking

into account the work of the SCF on definitions of climate finance, to better track climate

finance provided, mobilized, needed and received;

(h) Encourage climate finance providers and data aggregators, in keeping with

social inclusion and the potential value of information and data from the informal private

sector and from local and indigenous communities, as well as noting the usefulness of proxy

data, to incorporate into their systems the tracking of climate finance flows and impacts

relating to these stakeholders;

FCCC/CP/2022/10/Add.2

(i) Encourage climate finance providers to enhance their reporting on elements

relevant to Article 2, paragraph 1(c), of the Paris Agreement, thus increasing the ability to

advance work related to pathways for low-emission, climate-resilient development.

B. Overview of climate finance flows

36. Recommendations on the overview of climate finance flows are as follows:

(a) Encourage climate finance providers, including multilateral and other financial

institutions, relevant non-financial institutions and data providers, when reporting on climate

finance, to enhance the availability of granular, country-level data on finance for adaptation and

resilience as well as on finance for mitigation in the AFOLU and the water and sanitation sectors;

(b) Encourage climate finance providers and recipients to further enhance the

tracking of private climate finance, in particular for adaptation activities;

progress made on ways to improve data on climate finance and to engage with the SCF,

including through their participation in the forums of the SCF with a view to enhancing the

quality of the BA.

C. Assessment of climate finance flows

37. Recommendations on the assessment of climate finance flows are as follows:

(a) Encourage climate finance providers to continue to enhance country

ownership and consider policies to improve the balance between support for mitigation and

adaptation at the global level, taking into account country-driven approaches and recipient

country capacities and priorities;

(b) Encourage climate finance providers to enhance access and increase climate

finance for the LDCs and SIDS;

to continue to enhance access to climate finance, including by addressing the barriers to

access arising from the complex architecture of multilateral climate funds, and to enhance

country ownership through supporting modalities such as direct access entity and national

implementing entity accreditation, readiness and project preparation facilities and

subnational- and local-level access programmes;

(d) Encourage development finance institutions, in particular MDBs, to continue

their essential role in helping developing countries to deliver on their nationally determined

contributions by expanding climate investment through either expanding the availability of

development assistance or boosting climate-related investment directly;

(e) Encourage developing countries to take advantage of available modalities and

to advance in-country efforts to strengthen institutional capacities for climate change

programming and for tracking its effectiveness and impacts;

(f) Encourage climate finance providers and recipients to improve the tracking

and reporting of portfolio-level results in terms of the impacts and outcomes of climate

finance and advance the development of indicators for measuring the outcomes of climate

finance interventions;

(g) Encourage climate finance providers and recipients to improve the tracking,

reporting and dissemination of best practices in relation to the gender-related aspects of

climate finance, impacts of climate finance interventions and gender-responsive budgeting;

(h) Request the SCF, in preparing the sixth BA, to follow up on the

recommendations made in this and previous BAs.

plenary meeting

20 November 2022